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Australian shares closed at an over six-month low on Tuesday, with all major sectors ending in the red as cautious investors took note of the central bank’s warning of further policy tightening to tame inflation.

The S&P/ASX 200 index fell 1.3% to 7,033.20. The benchmark fell 0.2% on Monday.

On Tuesday, the Reserve Bank of Australia wrapped up its October policy meeting, the first chaired by Governor Michele Bullock, and decided to hold interest rates steady at an 11-year high of 4.10% for a fourth month.

Financials, energy stocks drag Australian shares lower; focus on RBA rate decision

While the meeting noted that recent data was consistent with inflation returning to its 2–3% target over time, Bullock signaled that further tightening would be required to bring inflation to target in a reasonable timeframe.

“The wishful prospect that interest rates would peak this year at 4.1% now appears to be off the table, with the rising expectation for one more rate hike and peak in the mid-2024 notably gaining more evidence and support,” said Hebe Chen, an analyst with IG Markets.

A further tightening would depend upon the data and the evolving assessment of risks, Bullock said.

“The RBA is being cautious, with good reason, given the concerns from China, the current household strain and the rental crisis,” said eToro market analyst Josh Gilbert.

Back in Sydney, financials dropped 0.6%, with the “big four” banks falling between 0.3% and 0.8%.

Miners fell 2.3% after sector behemoths BHP Group and Rio Tinto lost 1.9% and 1.8%, respectively.

Tech, energy and gold stocks .AXGD fell 2.1%, 3.7% and 4%, respectively.

New Zealand’s benchmark S&P/NZX 50 index fell 0.07% to end at 11,243.29.

The country’s central bank is also scheduled to announce its policy decision on Wednesday, with a Reuters poll estimating that the bank would hold its key interest rate at 5.50%.

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